Hospitality Management: Policies and Procedures for Company Assets That Need Maintenance - Assignment Example

MANAGE PHYSICAL ASSETS MANAGEMENT SUMMARY Part 1 of this report deals with the proposed asset register that is crucial to the development of the company’s asset program as it can help preserve and maintain detailed information of each and every asset a company owned. This part also includes the asset register structure, an asset labelling system that can be use to quickly identify assets of all sorts, the use of double-declining-balance as disposal method, and the appropriate procedures for reconciling the disposal of any asset every month. Part 2 on the other hand discusses the policies and procedures for company assets that need maintenance. It also includes justifications for hiring contractors instead of existing staff to perform the much needed maintenance. A sample memo for the staff is also included in the last section. Finally, Part 3 presents the organisational budget for new equipment procurement and a justified budget report. PART 1 Introduction The register of assets would form the basis for the development of the company’s asset program (Malano & Hofwegen 1999, p. 102) and the benefit of having an asset register for the equipment is preserving and maintains detailed information concerning the items that can be use to support managers in their depreciation and disposal policies (Edwards et al. 2003, p.285). For this reason, the following section discusses the proposed asset register structure, asset labelling system, proposed method of depreciation to be use for these assets, and the rational for reconciling the disposal of any asset each month. Asset Register Structure Department Unique_Asset_ID Acquired Date Cost Specifications Warranty Depreciation Human Resources OFTBL-1234-HR June-27-2007 $123.00 Stainless steel frame with glass 1 Year 10%/Year Accounting Dept. PC-1234-ACC April-4-2009 $850.00 Dell Dual Core Series 2900 1 Year on Process and Board 5%/Year The different elements in the asset register have its specific purpose. The ‘Department’ will serve as the ‘quick’ locator of the assets and the ‘Unique_Asset_ID’ would provide the asset specific details. The acquisition date or ‘Acquired’ date along with the cost element is important as this will be the basis for asset warranty and depreciation calculation. Asset details are vital to maintenance and replacement thus we have to ensure that ‘specifications’ of a particular asset is recorded in details. The ‘warranty’ element will help the management quickly identify if the non-functional equipment is still within the warranty period and the scope of such warranty. Finally, the ‘depreciation’ element will provide quick reference for the assets depreciated value. Asset Labelling System A numbering and asset labelling system should be implemented to help the management clearly identify all equipment. Thus, all assets should be properly inventoried and uniquely labelled with the location of the asset by incorporating the department’s initials. For instance, ‘xxxxx-HR’ for assets located in the personnel department. Moreover, there should be an established product codes corresponding to various types of assets such as ‘OFTBLxxxx-HR’ for a certain office table located in the human resources department. More importantly, these labels should place where they are easily noticed, ideally below the product logo. Labels should be proportional to the size of the equipment and should be tamper-proof or tamper-evident, and hard to remove. These measures would not only protect equipment from theft but make it easier to physically locate assets quickly when they are needed. Sample Asset Label: Method of Depreciation “Property and equipment are expensed over their useful life in a process called depreciation” (Schmidgall et al. 2002, p.283). Although the ‘double declining balance’ or DDB is more complicated to calculate than the ‘Straight-line depreciation’ method, this method is being proposed because it has the benefit of higher levels of depreciation that can reduce taxable income levels during the early years of the equipments life. To do this, we must first determine the ‘straight-line’ rate (1/number of years) then we multiply the SL rate by 2 to determine the DDB percentage; that is DDB% =2x SL rate. Lastly, to determine the annual depreciation expense, we multiply the un-depreciated amount of the fixed asset by the DDB% (Schmidgall et al. 2002, p.284). Reconciling the disposal of any asset each month Disposal procedures for fixed assets are very important since without these formal procedures, the likelihood increases that disposals are not being recorded (Swain 2007, p.6). This often leads to a situation where fixed assets that physically exist within the company and the asset listing used for accounting and tax purposes are completely out of synch. Therefore, a formal policy to ensure the reporting of fixed asset disposals should be adopted and should include the necessary level of approval for the disposal. A procedure for reconciling detailed fixed asset records to the general ledger should be implemented on a regular basis. The lack of such a procedure could lead to inaccurate reporting of fixed asset cost and depreciation expense in monthly financial statements. Therefore, to prevent the need for major adjustments to the property accounts at the end of each year, it is proposed that the general ledger fixed asset accounts be reconciled to the detailed records on a monthly basis. In relation to its implementation, it is also proposed that manual records be converted to a computerised system that would accumulate asset cost and calculate depression expense. The benefit of such systems is the elimination of significant amount of manual record-keeping duties, make operations more efficient, and provide more accurate information with which to make business decisions regarding fixed assets (Swain 2007, p.6). List of Documents Supporting the Asset Register There are a number of documents required to support the proposed asset register and these include: Copy of the supplier invoice including advice and receiving documents. Authorization documents Product Manuals Warranty Card PART 2 Introduction Studies have shown that optimised reliability and maintenance program can increase operation availability up to 10%, decrease maintenance costs by 10-20% and reduce both the number and severity of unplanned process interruptions (Capehart 2005, p.124). The maintenance plan would be a listing of all the preventive maintenance activities for each piece of monitored equipment. The objective is to know what maintenance type or level is due for the particular piece of equipment and the day and hour it should be performed. The report would contain a header information consist of a description of the equipment, the period of the scheduled maintenance, and the estimated time it will take to perform that task. Physical Assets that Require Maintenance (Restaurant) The following are the list of physical assets in the Restaurant that needs maintenance: Air-conditioning Units Freezers and Chillers Tables and Chairs Lighting Fixtures and Accessories Maintenance Schedule Equipment Code Make & Model Location Maintenance Required Last Service Date Next Service Date Additional Information (To be completed by Internal Staff or External Contractor Manager Signature AC-3456-RES General Electric Coolmate Model 329X Ground Floor Restaurant Filter & Fan Cleaning June-27-2009 July-7-2009 Dismantling and installation included TBL-1235-RES Woodcraft Inc- Dining Series- TL-223 Ground Floor Restaurant Check for stability/Re-painting Jan-4-2009 August-4-2009 Maintenance should be done on none-working hours Policy and Procedure for Implementation and Monitoring Policy Statement Policies are generally considered statements of direction that provide guidance so employees understand the boundaries within which they must operate. Moreover, a well-thought policy freedom of action, promotes initiative, and facilitates the delegation of authority throughout the organisation. More importantly, it promotes efficient use of resources in the organisation. Purpose The purpose of this policy is to guide employees on the implementation and monitoring of company assets to ensure that company investment is best used to support the overall strategy of the organisation. Procedure 1. Staff should always proceed with caution and with safety in mind. 2. Secure all necessary documents, clearances, and authorisation 3. On receiving new items, authorised staff should take all the details of the delivery including time and date, and personnel. Acquire all pertinent documents and product details and record them in the asset register. 4. All asset maintenance, relocation, transfer, or disposal should refer to asset register to avoid confusion. 5. All staff performing maintenance work should ensure that measures to protect other assets are installed. 6. Non-functional equipment or those found subject for repair should not be relocated or dismantled unless all pertinent documents are approved and the equipment is inspected by an officer-in-charge. Documentation 1. Equipment Maintenance Card Using Contractor for the Work The only advantage of using the existing staff for the task is their familiarity with the building and equipment within it and they are available immediately to respond to problems. However, some of them may not have specific skills thus training would be provided along with additional or special tools. Moreover, in-house supervision is required and breakdowns or other emergencies would be likely to delay other works. More importantly, measurement of productivity may not possible. In contrast, contractors provide flexible services and they have large workforce that is available to get work done faster. Their workforce has skills, experience, special tools and equipment to tackle complicated jobs. Although, management may need monitor their work to ensure compliance, productivity can be measured and give the company more security. _____________________________________________________________________________ Memo to Staff Memo : To All Maintenance Staff From : Operations Manager Re : New Policy and Procedure Beginning next week, we will be initiating a new policy and procedures for asset maintenance. Since the management had decided that the company would hire a maintenance contractor to do the work for us, your utmost cooperation is requested. You are to guide the members of the contractor’s maintenance team to the whereabouts of equipment and monitor the progress of their work. Each and everyone are requested to report any discrepancies in the execution of the maintenance contract and ensure that our assets are protected at all times. Daily report should be submitted to your immediate supervisor which will be forwarded to assistant operations manager on the same day. If you have any questions regarding these new procedures and policies, please do not hesitate to approach me in my office so we can make these policies and procedures more effective and meaningful with your cooperation. Thank you. PART 3 Introduction “New assets are required for the augmentation of the existing ones to improve the level of service” (Malano & Hofwegen 1999, p.105). For this reason, the purchase of the replacement of existing vehicle with new one is being proposed along with the procurement of a new office computer with relevant business software installed. More importantly, as part of the ongoing maintenance program, improvements of toilets and staff room facilities. _____________________________________________________________________________ Organizational Budget Operation and Maintenance Year End Date: 12/31/2009 Current Budget Previous Actual Next Budget INCOME SOURCES Earned Income $250,000 $180,000 $264,000 Total Income $250,000 $180,000 $264,000 EXPENSES Replacement of an existing vehicle with a new one $17,500 $0.00 $17,500 Purchase of a new computer with software included $0.00 $0.00 $15,000 Improvements of staff room facilities and toilets $0.00 $0.00 $7,000 Total Expenses $17,500 $0.00 $39, 500 Excess of Revenue Over Expenses $193,000 $224,500 __________________________________________________ Budget Report The primary reason for replacing our existing vehicle is to enhance our transport services as old and oftentimes under repair vehicles are affecting the performance and reputation of the operation. A new replacement would considerably reduce delays and maximise the working hours of the company’s employees. Similarly, the purchase of a new office computer with relevant business software installed would enhance our services and improve our accounting and maintenance activities. This new computer would give us the speed required in processing business transactions and documents required for our asset inventory. The proposed improvements to the toilets and to the staff room facilities would greatly enhance our employee’s performance and company reputation since we are giving our employees better working condition and environment. In general, all these expenditures are for the betterment of the company’s operational performance. Since asset disposition can occur for a number of reasons, including physical damage or replacement or sale due to non-use or obsolescence (Starinsky 2001, p.487), the proposed method of disposal is ‘Sale of Long-Term Assets’ particularly of the company’s old vehicle. This is because these assets are not totally depreciated and they still have a book value thus the company would gain if this type of disposal occurs. The proposed source of funds to pay the purchases would come from the operations budget since these new assets would be use to enhance our services and operational performance. Asset insurance may help protect the company’s investment, business interests, and activities in a manner that minimises, to the extent possible, the ability of malpractice claimants (Shenkman 2003, p.6). Protecting the newly purchased assets is a main concern thus for new vehicles, a comprehensive automobile insurance is recommended. For other assets such as computers and improvements to be made on particular facilities, fire insurance would be appropriate. Bibliography Capehart L. C. 2005, Web based energy information and control systems: case studies and applications, The Fairmont Press, Inc., 2005 Edwards D. G. et al. 2003, Management of off-highway plant and equipment, Taylor & Francis, UK Malano H. M. & Hofwegen P. M. 1999, Management of irrigation and drainage systems: a service approach, Taylor & Francis, UK Piedad F. & Hawkins M. 2001, High availability: design, techniques, and processes, Prentice Hall PTR, US Schmidgall R.S. 2002, Restaurant financial basics, John Wiley and Sons, US Shenkman M. 2001, 6 Hour Guide to Protecting Your Assets: How to Protect Your Hard Earned Assets From Creditors and Claimants, John Wiley and Sons, US Swain B. L. 2007, CPA's Guide to Management Letter Comments, CCH, US Starinsky R. W. 2001, Implementing J.D. Edwards' Oneworld, Cengage Learning, US Wallace M. & Webber L. 2006, IT Policies & Procedures, 2007: Tools & Techniques That Works, Aspen Publishers Online, US Read More